Marketplaces for B2B Manufacturers as Fast Lane to D2C Without Compromising Resellers
How to support your dealer network by taking a marketplace approachIntroduction to Marketplaces for B2B Manufacturers
We all know the classic childhood fable of the tortoise and the hare – the slow and steady tortoise wins the race because the cocky hare was so confident of his success that he took a nap and woke up to find that he had lost. Many B2B companies think they are the tortoise – slow and steady, sticking with their classic way of doing business, and ultimately winning.
However, the hare, the competition, has woken up from their nap. Now, they’re racing far ahead, utilizing technology and digitization to get the upper hand. To beat the hare, your business needs to be inventive and courageous like the tortoise, and embrace unconventional thinking – and one effective way for manufacturers to do that is to go Direct-toconsumer (D2C).
Compared to B2C and distribution and wholesale in B2B, manufacturers have lost time when it comes to embracing digital commerce. However, offering customers the convenience of online purchasing options is no longer a nice-to-have. Historically, manufacturers have developed their channel structure and go-to-market routes by forming relationships with resellers and other channel partners. Fast forward to today – more and more end users want to go directly to the source, the manufacturer’s site, and they’re willing to pay a premium to buy direct.
“This trend is not a temporary one. More manufacturers now understand that business buyers are now making digital purchasing a permanent change in how they procure products and services for their organizations.” – Digital Commerce 360, B2B Buyer Survey
Currently, this generates a strong area of tension and a perceived channel conflict for many manufacturers. Is direct customer access worth competing with a dealer network that you’ve spent so many years building up?
Unfortunately, we can’t wave a magic wand and produce a universal answer to this question, as every relationship is unique. With that in mind, this guide aims to draw attention to an alternative solution that enables the many benefits of D2C without undermining the existing dealer network: the creation of a B2B manufacturer marketplace, where your business is the operator, and your resellers are the merchants.
D2C is a gateway to new digital sales opportunities that have already proven their worth in many industries. They allow manufacturers to establish direct communication with the end customer. This not only drives revenue, but also provides valuable customer and product insights. The biggest challenge is the rising channel conflict by competing with existing partners.
In B2B manufacturing, many companies struggle to find their ideal use case for this highly scalable business model. That’s where this guide comes in. We’re going to show you in detail how B2B manufacturers can enable D2C by running their own marketplace. By doing so, manufacturers will gain direct customer access and data – while also enabling a win-win situation for themselves and their dealer network. Wily tortoise.
Background: the momentum of B2B marketplaces
Just like the hare is racing forward, the momentum of marketplaces in the B2B sphere is growing exponentially – and businesses who embrace this sales channel will reap the rewards. Gartner predicts that digital B2B sales exceeded direct sales for the first time ever in 2021. Amazon Business is projected to surpass $52 billion in GMV by 2023. For perspective, that is 5 times Grainger’s current size.
B2B marketplaces have sprung up in direct reaction to consumer needs. The Covid-19 pandemic changed the landscape of commerce for both B2C and B2B businesses, accelerating digitization and forcing companies to adapt or risk failure. As B2B buying habits have become more closely aligned with those of B2C, buyers have discovered just how convenient marketplaces are as sales channels, and expectations to be able to buy directly in B2B are rising accordingly.
Because of the convenience and lower cost of buying from websites, 80% of organizations have a formal target for increasing purchases through the digital commerce channel. – Gartner, Increase Profits and Delight Buyers by Becoming a Digital-First, Omnichannel B2B Seller
Digital buying channels, including marketplaces, are now firmly on the B2B business roadmap. 66% of companies are prioritizing digital sales channels within their organization according to the 2021 B2B Buyer Survey. This illustrates how digital buying is already a crucial channel for B2B and will only gain further momentum in the near future.
Why is a dealer network marketplace a good option for me?
In this section, we’re going to illustrate the modern challenges facing manufacturers, and why a dealer network marketplace could be the right solution for your business. Additionally, we’ll highlight some specific industries that would benefit from a manufacturer marketplace. Ready to beat the hare? Let’s go.
Modern challenges facing manufacturers
You can split the challenges that manufacturers currently face into two camps: the pressing need to go D2C, and potential channel conflict.
D2C – vital for success
The vast majority of business for most manufacturers is still being conducted the old school, tortoise way – over dealer networks and established routes from past connections. As industries and the world at large shift towards digitization, these dynamics are changing.
For one thing, customers can now inform themselves online and no longer need to rely on a sales representative to source information. Customers now expect to find the most reliable information and most comprehensive catalogue of products directly on a manufacturer’s website or app. Consider your own buying habits. If you want to purchase a new iPhone, who do you go to for the details? Directly to apple.com, or to your local Best Buy?
“41% of [B2B] buyers say that they would like to buy online but the products they need are not sold through the digital commerce channel.”
- Gartner, Increase Profits and Delight Buyers by Becoming a Digital-First, Omnichannel B2B Seller
Having a D2C channel is not entirely about the desire to sell directly to the consumer. It’s also about responding to the customer’s need for the most comprehensive product information – selling the products to them directly once they’ve found the information they need simply offers a convenient shortcut for your customer. And, potentially higher margins for your business.
The infrastructure and processes associated with going D2C are important for manufacturers to consider. Most manufacturers do not have the logistics set-up in order to ship single quantities of products directly to a customer. This is where the marketplace model can aid manufacturers in going D2C. Resellers, acting as merchants on the marketplace, have the infrastructure already in place to manage the shipping and end-mile delivery of your direct sale, via the marketplace.
If you as a manufacturer do have the infrastructure to ship directly, then your resellers can take advantage of dropshipping via the marketplace. This means that they can advertise and sell a wider range of products without having the inventory themselves – known as an ‘extended aisle’ – where the manufacturer ships directly to the customer.
Another important factor to consider is marketing. Most manufacturers have historically never needed to invest in marketing, so it’s easy to feel like a fish out of water. Going D2C forces your business to set up brand and product information (often requiring some kind of PIM system).
Since your customers want to come to you directly for the most up-to-date and comprehensive product information, this means a real investment in this side of the business. While the branding side of things might be daunting for many manufacturers, it should be viewed as an opportunity to develop traffic, build relationships with your customers and control your company’s messaging.
The final challenge to consider with D2C is the need for customer service. While previously, all customer service would have been handled by your dealer network, having direct access to your customers also means having to solve their queries and complaints.
The silver lining is that your brand is much more in control – you should view this as an opportunity to develop a world-class customer service experience for your customers. Since B2B is still about nurturing relationships, those businesses who invest properly into their customer experience will be the ones racing across the finish line in the future.
Channel conflict
Your current dealer network and resellers are a hugely important part of your commerce ecosystem, and going D2C won’t change that core fact – but your relationship will evolve. Most dealer networks will be actively opposed to manufacturers going D2C as it can be seen as a way of ‘cutting out the middleman’. This is where the marketplace model comes into play.
By establishing your current dealer network as merchants on your marketplace, you will work more closely together to ensure that you’re not competing with each other and potentially cannibalizing business opportunities. Explain to your dealer network that going D2C is vital for your business in order to stay competitive, and that you are simply opening up one new sales route alongside your existing channels through your dealers and resellers.
As a manufacturer, keeping your dealer network is vital because of the services they provide alongside the products. Most manufacturers don’t have the infrastructure or processes in place to handle return management, support and consulting, testing products in-store, repair services and spare parts, or local pickup like Buy Online Pick Up In-Store (BOPIS).
All of these services are at risk if your relationship with your dealer network is compromised, which is why it’s vital to approach your resellers in a collaborative manner and illustrate how becoming a merchant on your marketplace will benefit their bottom line. Further below we outline some of the specific value propositions for dealers to help you approach your network and communicate the clear benefits for their business.
Examples of industries that can benefit from a D2C marketplace
So we’ve covered the general concept and some of the potential benefits of a D2C marketplace by now, but it can be tricky to see how this model might apply to your own business without tangible examples. Below, we outline a small selection of manufacturers and how the marketplace model would be advantageous to their specific business. These practical use cases should offer inspiration of how a D2C marketplace would benefit your own company.
- Expert services – Bicycle manufacturers: Bike enthusiasts tend to be fastidious customers. They want to go into a store and chat to the clerk, usually a keen cyclist themselves, and feel that they are in the company of people and products that serve their particular needs.
Therefore, resellers are extremely important in the bicycle industry. Normally there will be a network of local brick and mortar stores that offer expertise and services, such as repair. It’s within a manufacturer’s best interest to keep this dealer network, as they help you to retain an already loyal customer base, who without the expertise, might easily slip away to cheaper online options such on Amazon.
In addition, the partner stores also assemble the bikes that manufacturers ship in bulk, readying them for last-mile delivery or pickup. By collaborating with your resellers via a marketplace, you retain all the benefits of their additional services, while gaining extra insights and access to your customers. - Full catalogue – Car manufacturers: People have been buying cars from dealerships for decades, where you would expect to be able to talk to an expert, test-drive the car and manage services such as repairs. With the advent of online branding and e-commerce, most buyers shopping for a new car will check out the brand’s website first. For instance, if you want to buy a BMW, you’ll go straight to bwm.com to see all the latest models, read the specifications, and find reviews. Without a D2C channel, buyers must first do their research online, and then go visit a dealership, resulting in an inconvenient two-step process.
By operating a D2C marketplace with your dealerships as merchants, a customer could seamlessly go from researching which car they want on your website, to purchasing it immediately via your marketplace interface – your dealership would fulfil the order, taking care of the inventory and end-mile delivery, but you gain direct access to your customer.
And with that, a chance to nurture a life-long relationship through your marketing activities. And if you’re at all sceptical about customers buying expensive investment purchases entirely online, just consider Tesla. However, with a marketplace model, your customer would also have the option to choose BOPIS, giving them the flexibility to go test-drive the car at a dealership for added peace of mind. - Product testing – Music instrument manufacturers: Any music aficionado will know that the experience of buying the instrument is part of the joy – you want to feel the weight of the piano keys under your fingers, or pick up that electric guitar and test how heavy it is.
With a D2C marketplace utilizing resellers as merchants, customers could buy directly online, while your resellers network solves the logistics side of the sale. This would include BOPIS, product testing and return management, in case the customer isn’t happy with what they ordered. - Bulk delivery – Large appliance manufacturers: It’s becoming increasingly popular to buy white goods such as fridges, washing machines and dishwashers online. The issue with D2C for large appliances is the complex and bulky shipping. It doesn’t make financial sense for a manufacturer to ship a single fridge, but it does make sense to ship a large quantity of fridges to the dealers who then take care of the last-mile delivery.
This can be achieved through a marketplace model, meaning that customers could buy a General Electric (GE) Fridge directly from the GE website (where they can access the most up-to-date product information), and the actual shipping and logistics would then be taken care of by a reseller such as Lowe’s or Home Depot, as merchants on the marketplace. - Full range – Paint manufacturers: Customers looking to buy paint usually have a very specific product in mind. Whether they need a small quantity of a specific color to decorate a nursery for new arrival, or a large quantity to revamp a huge corporate office space. To accommodate these needs, there are a host of very specialized paint stores where customers can mix the exact color they want and see how it looks in person.
Paint manufacturers, such as PPG or Dunn & Edwards, might see little reason to engage in D2C in this case, since the in-store experience is so vital. However, a marketplace offers customers the opportunity to browse the full range of paint products available, purchase them online, and then mix them instore. The manufacturers can then develop direct relationships with their end customers via branding and marketing, and ultimately increase their lifetime customer value.
As previously outlined in this guide, the two main challenges of a marketplace model for manufacturers are the pressing need to go D2C, and the potential channel conflict with your dealer network. As a manufacturer, is it possible to provide sophisticated D2C capabilities and own your brand and product information, while still supporting your resellers and dealer network?
The short answer is: yes, it is possible to have the best of both worlds. We’ve touched on it already, but the solution is to enable a D2C platform that is fundamentally a marketplace where your existing network of dealers and resellers are the ‘merchants’. Enabling a marketplace channel is an easy, flexible and scalable solution that will help you to integrate D2C with your dealer network as a supporting arm.
Do you need help getting buy-in with other members of your team, or from your dealer network? Below we will outline the value proposition for B2B manufacturers, resellers, and the end customer, so that you can come to the table fully prepared to fight the corner of the marketplace model.
- BOPIS: Your customers can purchase directly online and then pick up instore to see and test the products.
- White glove service & bulk shipping: Large items which require special handling, such as a big kayak or a piano, are difficult to ship and would be much more expensive for the end customer if handled directly by the manufacturer. Through the marketplace model, you could ship 10 of these items directly to the dealer, utilizing the bulk shipping processes already in place. Your dealers then employ their existing logistics infrastructure to handle the lastmile service, which saves both you and your customer money.
- Return management: Most manufacturers don’t have existing processes in place to handle returns, but in a marketplace model your resellers will continue to take care of the return management for you.
- Shipping management & cost optimization: Your resellers will continue to handle the logistics, including shipping and handling, so you can optimize shipping costs.
- Sell solutions: Instead of simply selling a product, your dealer network allows you to sell a solution. For instance, instead of just a work desk, your customers could purchase an entire remote work setup including desk, laptop, monitor, keyboard and mouse, all from one source, by utilizing the adjacent products sold via your resellers as merchants.
- Consultations and expertises: Your D2C customers will still be able to benefit from specialized advice from your reseller network.
Value proposition
- Digitization: By including your dealer network in your digitization efforts, your resellers will also benefit from the sophisticated marketplace technology to streamline their own processes and sales.
- Reach extension: Your resellers can leverage your brand reputation to extend their reach via your marketplace, accessing a greater pool of potential customers.
- Price & competition management: By allowing your resellers to operate as merchants on your marketplace model, they can benefit from an aligned pricing strategy designed to ensure that you are not in competition with each other.
- Portfolio expansion: By operating within your marketplace model, resellers will be able to create an extended aisle, offering products that they wouldn’t normally stock, because they can utilize drop-shipping via the manufacturer.
Value proposition
- Convenience: Your buyers benefit from the simplicity and transparency of using a single site provided by a trusted manufacturer, rather than multiple sites from the manufacturer and different distributors.
- Seamless single transaction: The customer benefits from only seeing one interface during a sale. While behind the scenes there will be a complex order management process with many participating distributors, this will appear as one single transaction to the buyer. This ease of sale increases customer satisfaction and ultimately leads to greater customer lifetime value.
- Full access to manufacturer’s catalog: Through the marketplace model, customers are able to access a manufacturer’s full or partial catalog through distributors while benefiting from localized pricing, inventory and delivery options. This is due to the fact that a manufacturer wouldn’t normally send out items in small quantities, but if the sale is completed via a reseller on the manufacturer’s marketplace, it doesn’t cost anything extra to include the small item the next time your reseller takes a delivery of stock.
Although it can sound complicated from the outside, it is fairly easy to launch a classic marketplace or transform your existing commerce platform into an enterprise marketplace. The basic principle remains the same: a marketplace operator runs the platform and invites third-party merchants to sell products via this platform.
The example of a manufacturer marketplace as described in this guide follows this exact same principle. You, as the manufacturer, are the marketplace operator, while your dealer network and resellers are the merchants. In this way, it’s not a ‘traditional’ marketplace, but more of a D2C approach that integrates and enables your existing network of dealers by utilizing a marketplace model.
But what exactly would this look like?
General setup
To launch a manufacturer marketplace, you would first need to create a D2C platform which is structured like a marketplace. As described above, that means designating your resellers as merchants on your marketplace, where they are able to participate (but don’t have to if they don’t want to). New dealers are also able to sign up as merchants.
Depending on your overall business model, certain dealers within your network might get exclusivity in a certain area – for example, with car dealerships who specialize in particular models.
Resellers are then able to manage the products that they offer their customers from the manufacturer via the marketplace. It’s important to note that your dealers should not offer competitive products on this site, from different manufacturers within your industry for example.
Dealers are then able to manage inventory, pricing and promotions via the marketplace, and manage the orders associated with their business.
Buyers can select from dealers near them, or dealers can be “pre-selected”.
As an end customer using the marketplace, you can either enter your zip code or use your geo location to pre-select the closest dealer. The buyer then has the option to pick a different dealer if they wish. These options help to support local dealers, and increase convenience for the buyer.
Pricing - can be the same for all dealers, or dealer-specific pricing and promotions can be shown.
This can be applied if the manufacturer wants to set a specific price for its products where all resellers then must sell the item for the same price. This way, the customer then just chooses the product in the marketplace, and selects their preferred dealer (where to pick it up or where it will be shipped) in the next step.
When you have different prices per dealer, customers can set a radius and view all the offers from dealers that have their desired item in stock with their different price points, and select the one that they like best, based on the optimum combination of price and distance.
Buyers never see the dealers, but the sale is associated with dealer
As a customer, you interact with the marketplace but never see the dealers, only the manufacturer’s product portfolio. When something is ordered, the manufacturer then forwards the order to the closest dealer who can ship the product. This is a win-win for all parties as it translates to faster shipping for the customer, while the dealer gets a sale and a movement in their stock, and you as the manufacturer sell directly without any of the struggle of execution.
Incentivize your dealers with bonuses
In instances where you sell and ship directly to the end customer, you can continue to incentivize your dealer network by offering bonuses for all sales within a certain distance from their store. This helps to keep your resellers happy, even though you’re selling directly to your customers.
Products must be available at dealer oroption to drop-ship from manufacturer
Manufacturers have many different options to control what they prefer or what they want to allow on their marketplace. Are you happy for your dealers to only offer products on your marketplace that they have in stock, or will you also allow them to advertise products that you as the manufacturer will drop-ship once they receive an order?
Pickup in-store vs. shipping (from store or direct from manufacturer)
As with the previous example, in a manufacturer marketplace model, you are the operator and therefore get the final call on which options you decide to allow. You can enable or disable any type of shipping option based on what makes the greatest business sense for you.
Spryker’s fully-integrated B2B & B2C marketplace capabilities
Spryker is the tortoise’s best friend. With the technology to curate any type of e-commerce marketplace, we can give your business that much-needed boost so you’re not left eating dust at the back of the finishing line.
Spryker Cloud Commerce OS is the first e-commerce platform with fully integrated B2B and B2C marketplace capabilities. While building the Marketplace Solution, Spryker developers ensured a consistent user experience for the end customer, third-party merchants and marketplace operators – resulting in a seamless buying experience.
A single platform and infrastructure avoids complex integration and licensing issues that often arise when a marketplace is built on different e-commerce platforms. This means that our existing customers can effortlessly upgrade and extend their Spryker shop with marketplace functionalities. What’s more, you can add a Spryker marketplace solution to your existing e-commerce platform, even if it’s with a different provider.
Extensive new capabilities ensure that all the needs of running a marketplace are met, such as additional back office functionalities, a brand new merchant portal or well-arranged shop integrations.
Don’t forget – the tortoise wins the race by outsmarting the hare. And who says that the tortoise can’t team up with a partner to do so? With unlimited options for customizing your marketplace exactly how you want it, Spryker is the perfect partner for your business’s future success.
Conclusion
Let’s review what we’ve learned in this guide about marketplaces for manufacturers:
- The hares of the commerce world have woken up from their naps and they’re racing ahead. You’ve got to adapt and evolve to beat them.
- The B2B space is seeing a huge increase in digital capabilities, including marketplaces. Businesses who do not have direct access to their customers are playing a losing game.
- The solution is enabling a D2C sales channel. As manufacturers historically rely on relationships with their dealer network, a win-win solution for every party is to set up a manufacturer marketplace with your resellers as merchants.
- Marketplace models have multiple feature options for every different scenario, meaning manufacturers can customize their platform to solve their exact business complexities.
- With the right technology, setting up a marketplace is easier than you might expect. By teaming up with Spryker, you can take advantage of our flexible and composable marketplace capabilities to build the solution you want.
Digital is now embedded into the daily business of B2B buyers. Technological innovation i driving the evolution of ecommerce, and the adoption of these technologies is accelerating. The buyer is in the driver‘s seat. The majority not only start their research online but they prefer to conduct various steps of the end-to-end process digitally at their convenience.” – Andrej Maihorn, Vice President of U.S. GTM and Industry Solutions, Spryker
About Spryker
Spryker is the leading global composable commerce platform for enterprises with sophisticated business models to enable growth, innovation, and differentiation. Designed specifically for sophisticated transactional businesses, Spryker’s easy-to-use, headless, API-first model offers a best-of-breed approach that provides businesses the flexibility to adapt, scale, and quickly go to market while facilitating faster time-to-value throughout their digital transformation journey. As a global platform leader for B2B and B2C Enterprise Marketplaces, IoT Commerce, and Unified Commerce, Spryker has empowered 150+ global enterprise customers worldwide and is trusted by brands such as ALDI, Siemens, ZF Friedrichshafen, and Ricoh. Spryker is a privately held technology company headquartered in Berlin and New York backed by world class investors such as TCV, One Peak, Project A, Cherry Ventures, and Maverick Capital. Learn more at spryker.com.